2021 EP1023 - PLANNING MATTER RADIO

We want you to plan for success. Welcome to Planning Matters Radio. And hello and welcome in to Planning Matters Radio. I am Peter Rishon, president and founder of Rishon Planning, a local independent fiduciary financial investment and retirement planning firm that covers a lot of information right there. But if you've got questions about your money at any stage in life, what to do with it, how to handle it, where you should be putting it to work for you, we serve as a resource for you. And you're welcome to give us a call. Be in touch with any kind of questions or concerns that are on your mind. We are here to help give us call 919-300-5886.

That's 919-300-5886. I am a series 65 investment advisor representative, and a Ramsey trusted SmartVestor Pro. And that fiduciary responsibility means that I have a moral, legal and ethical requirement to put the best interest of my clients as the first and foremost priority whenever making any kind of financial recommendations. That's a responsibility that I take very seriously. I also want to tell you that if you call, if you've got questions, I will be the person that you speak to directly.

It will be me. I am the investment advisor representative in the firm. I am the CEO and owner of the firm, but also the one that meets with clients on a face to face basis.

So the voice that you hear on the radio, me, Peter Rishon, that would be the hand that you shake the eyes that you look into the face that we are talking face to face together with you would be meeting with me. And I would enjoy and appreciate the opportunity to help you in any area of your financial, your money, your investment life and trying to make the most and the best decisions with your money, your dollars that you've worked so hard for. Money is important. It is a tool.

I will let you know it is not the most important thing. It is only a tool. It is a tool to support what is truly important to us. And like any tool, it can be put to good use or it can be misused.

There's an old saying that when every job no, when the only tool you have is a hammer, every job looks like a nail. Well, that is not the way that money should be handled by any means. Money can do a number of things for us. It can be safe.

It can be liquid. It can grow. It can provide an income, but money is a pretty terrible multitasker. And so with every dollar that you have, when you choose to save it or invest it or deploy it, you need to choose which two of those are most important to you. Growth, safety, liquidity, and income money in the bank is about safety and liquidity.

You know, it's there, you know, you can get your hands on it pretty quickly. Money in the market doesn't have that element of safety. And if it's in the market fluctuating and going up and down, it generally is not a great source to produce a reliable, consistent, durable income that you can depend on.

Yes, it has the opportunity for growth. And yes, if you don't like what you're invested in, you can cash out pretty quickly. So it's liquid money in the bank is not fantastic for growth right now. We have a less than 1% interest rate environment and most checking savings and money markets account are earning significantly less than that money in longer term CDs, annuities, real estate, traditionally bonds.

Those are more about safety, although none of them have guaranteed safety in all elements. There's always risk involved in any financial vehicle that you choose, but they generally also produce a growth or an income. So safety and growth or safety and income, you get to choose between those two. If you don't need an income, you reinvest the income that constitutes your growth. Again, in annuities, in real estate, in bonds, bonds produce yield, real estate can produce appreciation or income, same with annuities, growth or income. So you get to choose those and longer term CDs, much the same way you have given up an element of liquidity. You have designated a period of time that you are dedicating that money for.

And in return, you get a little higher rate of growth than what banks would offer you on short term checking savings liquid accounts. So again, this is an important tool. It's a tool that can perform one of four jobs for you. And any place you put that tool to work, you need to understand what the objective is, what you're trying to achieve. Also, just like a tool, it can be fantastic, but you've got to know what that use is like a blueprint. And you don't put money to use without that plan, without that blueprint. If a contractor or a home builder came to you as you were looking to build a home and said, I can build your home for you. I've got this hammer.

Well, that's a start. It's a fantastic tool. It will probably be a necessary tool, but at the same time, that is not the only requirement that you would have of that home builder or contractor. You would want to see a blueprint. You would want to see all of the features, all of the customizations, all of the structure of the home that you hope that home contractor can build for you.

That is the plan, the financial plan, the retirement plan, what we call the optimized retirement plan. That's the blueprint phase. That's where we are designing everything. And in that designing process, we are choosing the features. We are looking at the structure. We're looking at the foundation, the walls, the roof. Where do the windows go? What kind of landscaping do you want to flesh that analogy out a little bit more?

But the important thing is that the tools that are there and that we have available, those are only really decided upon what tool is appropriate, what tool is necessary after we understand what we're trying to build. And everybody's situation is a little different. I remember a day very early on in my career where I had two appointments. One was with an oncologist, a cancer doctor at a local hospital, and the other was with a manager of a deli department at a local grocery store chain. And I knew which one of those as the day began, I was a little bit more excited about meeting with that day because I figured the oncologist probably had more money. However, by the end of the day, the one that I felt would truly be a great client and had a very realistic chance and reasonable expectations of retirement success was actually the deli manager at the grocery store. And it really changed my perspective on who I was looking for as an ideal client.

I wanted someone that had realistic expectations. Now I would love for everyone to have as much money as the oncologist did, but that individual spent a lot of money as well. And just, I guess for an analogy, if I had $10 million in my checking savings, retirement accounts, $10 million in investable assets to my name and my net worth, that's fantastic.

But if I was spending a million dollars a year in retirement, I couldn't expect it to last that long. And so it's not really about how much money you have. The more, the better, but money does not solve all problems.

However, it does tend to make some problems seem a lot easier. So the more that you have, fantastic. However, you also need to have a realistic plan for keeping guide rails and guard rails on your spending. Those that have been lucky enough to be affluent, to earn a higher income, generally don't pinch every penny.

Don't stretch every dollar. They are lucky. They are blessed. They are in a position where they have not had to do so, which is great for them. But when you walk away from your job, when you walk away from your paycheck, the change in income for that individual is that much more substantial and dramatic. For those that have been paying attention to their budget, that understand that every dollar is important and they are pinching those pennies, they are stretching those dollars, and they're still doing what they can to get money saved for their future in retirement accounts.

The goal would be about 15%, regardless of where you fall in your income, 15% of your gross household income going toward those retirement accounts. But for those that have been paying attention to their budget, the transition to retirement actually seems to be that much easier. Because in retirement, we've got a finite amount of money, the amount of money that we've worked so hard for your life savings. It's not your investment portfolio that makes it sound like something that maybe is expendable. It is your life savings. Don't minimize that.

And I certainly don't. This is what you've worked your whole life to build and accumulate. And you've done so because throughout your life, to get to that point, you've traded your time for money. That lump sum, your life savings, represents your ability to no longer have to make that trade-off, to no longer have to set the alarm and show up for work. That lump sum life savings is what you have to transition into a paycheck replacement for retirement.

And so again, it's not necessarily what you have saved, but those that have been more careful with maintaining their budget and expenses and balancing the two against the income that they had during their working career, the transition seems to be that much easier because they already have some guide rails and guard rails on their spending. I remember when I used to take my son bowling for his birthday and when he was real young, we used to put up the alley guards, the guard rails, and I still tried not to use them, but it sure made bowling easier. Maybe it was a confidence thing. Maybe every once in a while I sort of nicked one of the guard rails and maybe sometimes I bounced it in between like a bouncy ball and just saw how many pins would knock down. The ball wouldn't go in the gutter.

And it was fantastic. Those guard rails kept my ball heading toward the pin, toward the target, kept me on track. And that's what the spending plan specifically, as part of the optimized retirement plan, that's what your written retirement income plan will help you do.

Those are the guard rails. And if you'd like that written retirement income plan, part of the optimized retirement plan, give me a call, 919-300-5886, 919-300-5886. If you'd like to look over your spending, your expenses, your budget, your income, your assets, what are your available sources of income for retirement?

How do you maximize social security and make a good decision with it? That is a valuable component of retirement. And we are a little concerned with what the future for social security might hold. But I don't think that it's ever not going to be there, because it's funded through current workers, wages, salaries, and taxes. I think they'll make some changes to the system. I think they'll do some things that they're going to eventually have to do in order to solidify it.

I don't think they'll be very popular for doing it. But I do think that for those who are already claiming and collecting and receiving social security, and for many of those who are within range, within earshot of making that decision and full retirement age at this time, they'll probably receive what they've been promised and what they are entitled. I don't have a problem with the term entitlement. I feel I am entitled. I'm 41, but I have been paying into the system for nearly 25 years, a little longer, actually. So I do feel entitled to what I have paid into.

That should be there for me. I've set money aside, just like you have set money aside, and it should be there for you. That being said, you want to make the best decision possible with it. Because the difference between a good decision with social security and a poorly timed decision with social security can make the difference in several hundreds of thousands of dollars, particularly over a married couple's lifetimes. And between a married couple, there's lots of different ways that you can claim and collect. Even if you just look at claiming on your own benefits in full year increments, we can claim anywhere from 62 to 70. So that's nine different choices for me, 62 to 70 for my wife, nine different choices for her, nine times nine, that would be 81 different potential combinations if we were only collecting our own benefit and only claiming on full year increments.

And there are a lot of additional choices. The Social Security Administration doesn't provide a lot of education or guidance on when or how to claim and collect. Their job is to help you file the paperwork and claim the benefit on the day that you show up, not tell you if that's the best day to show up. They don't know your situation, the rest of your picture. They don't take on that responsibility or liability of giving you that kind of proactive guidance. But it is something that we can sit down with you, help you run through the numbers, through the different options, crunch those and come up with an optimal strategy.

Now, no one can tell me the best strategy because I have yet to meet the person who's come into my office and told me the exact time and day they are going to pass. I don't think we're meant to know. And therefore, we'll never come up with the absolute best solution for Social Security. But we can come as close as possible. We can optimize that decision. And the way that we optimize it is we look at Social Security as part of the bigger picture. It is part of the puzzle. It is a important piece of the puzzle. Maybe it's the border.

Whenever I did puzzles, I used to always do the border first, the outline, the hard edges, the straight lines around the border made that part the easiest and it's the most important to gauge where all of the other pieces and the colors would fit in. That's kind of Social Security. It is the guide rails there for a lot of other pieces of your retirement. The more you can make from Social Security, the less strain and stress and reliance you'll have on your personal assets. Now, Social Security is only a piece.

It can't be thought of in a vacuum. For some Americans, unfortunately, a higher percentage than it probably should be. Social Security is the only source of retirement income that says one of two things. Either those individuals have not done all they could or should have to have saved personally, or those individuals are doing very well in living a low expense, frugal lifestyle and they've got the other assets.

They just don't need them to afford that lifestyle. Well, most people have Social Security as just part of their retirement income. Most people, it constitutes a portion of that income, maybe 30, maybe 40, maybe 25%.

And then the rest of the income comes from other sources. Pensions are a fantastic source, if you have one. Most people who have worked in the private sector don't. Pensions by and large have been dwindling and not nearly as many companies offer them as once did.

Even if you worked for a company that once did, they may have frozen or suspended or terminated the pension. And since ERISA in 1974, it's been much more about putting the burden of funding retirement onto our own personal shoulders with the inception of the 401k. And really, this is when the average Main Street American actually started to become a Wall Street investor. Before that point in time, before the inception of the 401k, by and large, investing was for the ultra wealthy, for companies and for institutions. But when the 401k came about, we all started to invest on a regular basis. And who benefited?

Well, the financial industry and mutual fund companies. And we piled money away and have been doing so for about 40 years for most of us. When we get to the end of that period of time, we've got a certain amount of money. It's a finite amount.

That's all we've got. And we've got an unknown amount of years that we need to make that money last. Now, if you've got a plan to maximize social security, to minimize risks, to address income, you probably have a good chance of making that money last.

If you set up a written retirement income plan, those chances are dramatically improved. Now we've got to address things like fees and taxes and healthcare and goals to leave a legacy behind. Not everybody wants to leave a big legacy behind. Not everybody feels they'll be able to. More and more these days, I hear people saying, well, the purpose of my money is really to support my own lifetime needs. And that's completely understandable. That's not a selfish sentiment. But if you've got a written retirement income plan that assures you, gives you some confidence that you will have enough income to last the duration of your lifetime, the chances of you leaving something behind are dramatically improved and increased.

And so we should talk about legacy as well. What happens with the rest of the money when you're gone? Who do you have it earmarked for? Are they ready to receive that kind of money?

Whatever you happen to leave them. If you live a long, long time, if you don't live a long, long time. Again, these are factors that we talk about in the optimized retirement planning process. I am Peter Rochon. I am looking forward to helping and assisting. It's something that I really enjoy about my job and my profession because not everybody has a fantastic handle on their money. Now I talk to a lot of people who do, who've done a fantastic job in growing and investing and in managing their funds.

But that part of it is really only half the story. And it's actually a lot easier to manage your money when you've got a paycheck coming in, when you are trading your time for money, when that paycheck stops, the planning becomes more important. And that's why we offer that optimized retirement planning process. If you'd like to take advantage, give me a call.

919-300-5886, 919-300-5886. Some interesting news this week. I guess former president Donald Trump announced that he would be launching his own social media platforms.

And as such, there was a platform, specifically a company where he partnered with them. DWAC is the stock ticker and it shot way, way, way up. I mean, it was up like 350%, I think on Thursday. And then on Friday it was back down significantly, but a lot of people dumped in a lot of money. By the time that announcement was broadcast to the general public, the price of the stock had already soared. It was already way, way up. A lot of people were excited about that. Oh, this stock has really taken off.

It's a rocket. It's going to the moon as the meme stock said. Well, a lot of people got in as it was peaking toward its top. And subsequently the next day, Friday, when it came down, they lost a significant amount of money. Now, I don't know where the true value of this company is going to fall. If that thing really catches on, if the platform functions well, is user-friendly and a lot of people are attracted to it, perhaps the value could go back up. If it flounders, if it does not come true fruition, then perhaps the value could go down.

I don't know the future there. But what I do know is that reacting on rumors, reacting on hearsay sometimes can lead us to making irrational decisions and reacting to the direction of the market more often than not leads us to making financial mistakes. If I get excited about something when it's going way, way, way up and I say, oh, I've got to get in on this and I buy in, I have bought in after it's gone way, way, way up. If I see that the market is going down and I get worried and I get scared and I say, oh no, I can't afford to lose any more money and I sell out, I've already lost that money. And that's a big part of where the help and the guidance of a long-term plan and an accountability coach, a financial advisor, investment advisor, somebody who can give you proactive advice to hold you accountable to sticking to that plan can really pay off. But here's the bottom line is that you should only be taking risk with money that you can afford to lose with money that you feel comfortable seeing fluctuate.

I'll give you a few more statistics. In the last hundred years, we have seen 16 different bear markets. Now, the definition of a bear market is a 20% loss in market value, and you can pick your index, the Dow Jones, the S&P, the NASDAQ, the Russell.

Those are the most commonly referred to. Those are the ones that are broadcast on the bottom of the TV screen minute by minute on the stock channels, on the financial news networks. The Dow is 30 stocks. The S&P is 500 stocks. The NASDAQ is comprised mostly of technology stocks.

The Russell is a much broader base of stocks across the country, domestic stocks. If those lose 20% in value, it's considered a bear market. Now, we've seen 16 of those in the last hundred years. That's an average of about every five and a quarter to five and a half years. A 20% downturn is the minimum. On average, those 16 downturns have lost almost 40%, like as close to 40% as you can, about 39 and a half percent is the average bear market. From top to bottom, as we enter into that bear market, the time it takes for the market to decline to its low point on average takes about a year and a half. So, we've spent now a year and a half just watching our money slowly bleed away. And during that year and a half, a lot of people wake up one day and decide enough is enough. I can't stomach seeing any more losses.

I can't afford to lose any more money and they sell out. Well, bear markets turn into bull markets and do eventually recover, although the average recovery period lasts another five years for each one of those bear markets on average. So, on average, we've got a nearly 40% loss happening 16 times in the last hundred years on average about every five and a quarter to five and a half years. And again, on average, a peak to recovery period to where we have not made money, we've lost money of about six and a half years. And if you're making a paycheck, that may not actually impact your life.

If you still are secure in your job and earning new money, that may not affect your standard of living in day-to-day life. And in fact, if you are making contributions during that period of time, you are dollar cost averaging, you are investing into your retirement accounts in your 401ks, it's an inherent advantage. Because for that entire year and a half, the market was going down. We don't love to see that, but we love to buy in when that is happening. And for the next five years, we were continuing to buy in as prices were climbing. That's what has made most people money over the last 21 years. They say the market always goes up, but from the year 2000 to 2013, the market moved sideways. Now, if I told you there was a period of about 13 years where we will see two different 100% returns in market values, you would expect that to be a pretty good decade. Except during that same period, which actually happened from 2000 to 2013, we also experienced two different 50% losses. And so the net result was 13 years where the market just moved sideways. If you invested money in the year 2000, minus fees, minus dividends, minus yield, minus taking out income, just letting the money ride in one of the major market indices, you really did not make profit until 13 years later. 13 years where the market did not always go up. And in fact, it didn't go up and that's not uncommon. There have been other long periods of time where the market has gone down, gone up, gone down, gone up, and essentially moved sideways before it had a major breakout above those levels. Now, we hear this average rate of return that the market is supposed to produce for us, seven or eight or nine or 10% average returns. If you look at where the S&P started in the year 2000 till the end of 2020, that is 21 years of time, the average return of the S&P during that period of time was 4.58%. That's a lot of risk for 4.58% returns. So again, the market's fantastic. It is a great vehicle for growth.

Over time, you should experience a growth above the rate of inflation, but there's no guarantee that today or tomorrow or next year, the market's going to be higher and no guarantee of the rate of return that it's going to produce. So when we are sitting down for the optimized retirement plan, we look at how much risk is acceptable to you and how much risk is necessary in order to try to achieve our goals. We only believe in taking necessary risk and no more than is necessary. We try to identify opportunities for you to be more efficient and protect what's important. And for most people who have reached the point where they're transitioning into retirement or already retired or getting close, they've accumulated a good amount of money. Tax management and being efficient and keeping as much of what you have earned as possible becomes in many cases more important, almost universally just as important as the investment management.

If we can earn a reasonable rate of return and keep more of our money, that ultimately is a formula for long-term success. Now we'll look at all of that. We look at the plan as a whole. We build a blueprint.

We look at your income, your investments, your taxes, healthcare, legacy, and there's a lot of subcategories in each one of those. If you'd like to find out more, give me a call, Peter Rochon. You and I, we will talk personally. You will be talking to me. I will be the one providing you direction or advice or answers to your questions. You can go on my website. You can download a copy of my book, Understanding Your Investment Options.

It might be the cure for insomnia, but it's got a lot of great information and I hope that you enjoy it and get something out of it. But I also look forward to speaking with you to specifically answer any questions that you have, structure a plan for you, or review your current plan to see where you can be more efficient, where there are strategies that can help you do better. Give me a call, 919-300-5886, 919-300-5886. I am Peter Rochon with Rochon Planning. You can visit us online and download a copy of that book at richonplanning.com.

That's what it looks like, richonplanning.com. It's my last name, Rochon, Peter Rochon, Rochonplanning.com, 919-300-5886, 919-300-5886. I look forward to hearing from you, helping assisting any way I can. I wish you all the best for your financial success. Thank you for tuning in to this edition of Planning Matters Radio.

This has been Planning Matters Radio. The content of this radio show is provided for informational purposes only and is not a solicitation or recommendation of any investment strategy. You are encouraged to seek investment, tax, or legal advice from an independent professional advisor. Any investments and or investment strategies mentioned involve risk, including the possible loss principle. Advisory services offered through Brooks' Own Capital Management are registered investment advisors. Produciary duty extends solely to investment advisory advice and does not extend to other activities such as insurance or broker dealer services. Advisory clients are charged a quarterly fee for assets under management, while insurance products pay a commission which may result in a conflict of interest regarding compensation.

This has been Planning Matters Radio. The content of this radio show is provided for informational purposes only and is not a solicitation or recommendation of any investment strategy. You are encouraged to seek investment, tax, or legal advice from an independent professional advisor. Any investments and or investment strategies mentioned involve risk, including the possible loss principle. Advisory services offered through Brooks' Own Capital Management are registered investment advisors. Produciary duty extends solely to investment advisory advice and does not extend to other activities such as insurance or broker dealer services. Advisory clients are charged a quarterly fee for assets under management, while insurance products pay a commission which may result in a conflict of interest regarding compensation.