2022 EP0122 Planning Matters Radio Top Concerns

Welcome once again to Planning Matters Radio. I am Scott Wallace and we will be shedding some light on your financial situation and hopefully having some fun along the way. My guest today is an author, a fiduciary financial investment and retirement planner.

He offers the proprietary optimized retirement plan for all his clients throughout the great state of North Carolina, Peter Rashan. Thanks for joining us. It's a pleasure Scott.

Great intro there. Try to help people with their financial, their investment, their retirement planning. Make sure that they have a grasp on their money, confidence with their money so that they can go out and do the things that are more important in life than constantly worrying about their money.

So that's, that's the gist of it. And the fiduciary responsibility that you mentioned, you know, that's a big part of the relationship with an advisor these days. You want to have somebody who is looking out for your best interest. And that's what that fiduciary responsibility entails and dictates. It's more of, in my mind, a moral and ethical thing, but it is a legal standard of care, the fiduciary standard of care.

Well, we're so happy to have you with us. If you want to talk to this fiduciary, Peter Rashan yourself, you can call them 919-300-5886, 919-300-5886, or go to his website, www.richonplanning.com. Peter, what are the, what's the kind of feeling out there in the financial and personal investment world right now? I think people have all kinds of concerns about their money. I mean, even those that are fairly comfortable with investing and with the market that have had some experiences over the past couple decades that have been up, down, sideways, good times, bad times, and everything in between, I get a sense of angst right now. And I'm actually seeing a lot of marketing that is probably building some of that angst. And I hear a lot of people who come in and are worried about some of the marketing that I have seen and read and watched. Look, folks, the sky is not falling here. And there's some marketing out there that seems to make people concerned that society around us is decaying, eroding, and on the verge of collapse.

And, you know, I think that there's a time in every generation, maybe even every decade, where people feel like, oh, this is it. This is the end. The sky really is falling.

The dollar's going to go to zero. And then life goes on, right? We have to plan as though life is going to go on in some capacity. Now, can we be worried and concerned about some forces and factors and issues? Yeah, absolutely.

It's right. It's appropriate to be aware of and be concerned about some issues. And right now, we have a lot of issues with everything involving COVID and coronavirus and lockdowns and shutdowns and supply chain and then the government reaction to all of these issues and the creation and infusion of so much money, the national debt, the deficit, the inflation. What all does this mean for American society, the value and the standard of our dollar, right?

There's a lot of worry. But when marketing comes out and says the government is going to confiscate your IRA, the dollar is going to crash and be worthless, you know, you have to take that with a grain of salt. Because first and foremost, we're not going to see some type of Cyprus style shutdown. I don't know if you remember this, but like several years ago, the country of Cyprus, it's a small island nation, basically shuttered the doors of their banks and confiscated a portion of the wealth of the citizens, a portion of the savings.

And they reopened their banks a couple weeks later and people had 30 or 40 percent less money. The American government is not going to do that. They would have a real major issue on their hands if they did. And that number one job of politicians to get reelected, well, they would all be fired. They would not succeed at that job if that were to occur. And those American citizens who are generally quiet about issues because they are at work and being productive would all of a sudden have a whole lot to say about. So they are not going to just shutter the bank doors and compensate your wealth. But here's the other side of that. They don't necessarily have to. The greatest concentration of wealth in America is in yet to be taxed, tax deferred retirement accounts.

Right. We've got over 30 trillion dollars now saved, stashed and put away with an arrangement with the IRS. The deal is that we are going to allow them to tax those dollars later.

So a lot of these initiatives and a lot of the things that have actually occurred that the marketing that I am seeing bends into scare tactics, in my opinion, are legitimate. Like the government is putting into place rules and laws that change how those dollars are going to be taxed into the future. So when they say the government is coming after your IRA, well, they're not going to just confiscate your IRA.

That's not what's going to happen. But if they incrementally raise taxes over time, they're going to get more of your IRA. Or if they change the laws, which they have, the SECURE Act passed in 2019, went into effect in 2020, changed the laws on the way that those tax deferred dollars can be transferred to the next generation.

So they have changed the rules there. When they did, that was a de facto tax increase on those retirement accounts as they passed generationally. Now, why would they do it when it passes generationally? Well, people who are dead can't complain and people who are receiving a large amount of money generally don't complain too much, even if they've got to pay some taxes.

So they figured that was the window of opportunity to attack some of these accounts. They are making some additional changes to retirement accounts specifically that really tip the cap that the intention of these accounts is for retirement, not for generational wealth transfer. Where an IRA used to be a decent generational wealth transfer tool, these new rules, these new laws make it not so, make it a very unfavorable generational wealth transfer tool.

Well, okay, that's fine. If retirement accounts are for retirement, there are other types of tools and accounts available that are for generational wealth transfer. We just need to trade in that old jalopy for the new upgraded Lamborghini of vehicle to do the thing that we want it to do. It's just a lot of people don't understand that specific types of accounts have specific reasons and purposes and results. And so, again, going back to this marketing that I'm hearing, they make it out to be that the sky is falling, the dollar is collapsing, and the government's coming to pick your bones for what's left.

You just have to back up and breathe. The dollar has not always been the world reserve currency. Before World War II, it was the British pound sterling. As far as I know, Great Britain, England is still around. Their society did not collapse when it changed over to the dollar. And even since then, Europe has gone through a few different iterations.

They unified with the euro and the European Union, and then there was Brexit, and Great Britain left that. There are changes that occur, but the dollar is still a strong currency, and it is the world reserve currency for a number of reasons. Could that change in the future? Potentially, but it would take a process.

I don't see that happening tomorrow. I don't see the value of the dollar going to zero. Here's the thing is that most often, when I see that marketing, it is from one of two sources. It is from an entity who is selling gold, or it is an entity selling life insurance. Now, the entity selling gold wants you to believe that the dollar is going to collapse and go to zero and be worthless.

Here's my question. If they're so convinced that the dollar is going to collapse, then why are they willing to send me their gold and trade that for my dollars? It just doesn't make any sense. It's pretty foolish when you put it that way.

Absolutely. They are not convinced that the dollar is going to zero, or they wouldn't take my dollars and trade me for their gold. What they do know is that they make a commission on the sale of gold, and the more people that they can convince to buy gold, the more they make in that commission. There's nothing wrong with owning gold. I think there is some value and some purpose and some reason to own gold. But don't be scared by this marketing into believing that you've got to cash in your entire life savings and go to gold in order to store or retain any kind of reasonable value. There will be value in the dollar. There will always be some value in gold as well, but these things fluctuate.

They move. When those selling the gold can convince you with a scare tactic out of fear to purchase more of their gold for your dollars, they make more money in commissions. On the other side, the life insurance, where they are telling people, hey, the government's coming after your retirement accounts. You need to trade in that old IRA. Oftentimes, what I am seeing is that that is coming from an entity selling some type, form, or fashion of life insurance. Again, life insurance is a fantastic tool that is available for very legitimate reasons, but the scare tactic marketing has people doing things inappropriately with life insurance. Cashing out IRAs that they should not be yet cashing out. Purchasing inappropriate amounts of life insurance and probably the wrong type of life insurance very often.

So, just breathe. Take a step back and think about the source of the marketing and if you want to talk to somebody about concerns that you are having. Legitimate concerns day to day about budgeting, about market risk management, about the rates of return, the fund selection that you have, about tax management. All the way up to concerns that the dollar is going to collapse and how am I going to survive the zombie apocalypse. We can talk to you about those things, bring it down to a reasonable level, talk about the issues, identify them specifically, and then identify some tools or strategies to address those issues so that you feel more confident day to day about your money. No matter what the issue is, whether it is all the way on one end of the spectrum to very extreme or something minute that just lingers in the back of your mind, you don't want to spend so much of your time worrying about your money that it consumes you. You want to be able to use the tool that money is to enjoy your life and to support the things that are important to you, Scott. Words of reason from someone who knows what they are talking about.

If you want to talk directly to Peter Rochon as he mentioned, you can call him at 919-300-5886. Peter, you mentioned gold isn't necessarily the best way to preserve wealth. The U.S. dollar is still and for the foreseeable future will be a great way to store wealth. It's the world's choice of how to store wealth at this point. How do I know that I'm saving enough of that U.S. dollar? How do I know that I'm saving enough money to counteract all these things that you're talking about? First, gold is a great way to store wealth, but gold is not real transactional. So that storage of wealth versus the ability to transact wealth are two very different things. So that's why I do think that there is some legitimate purpose and portion of your total net worth that you could consider gold with.

Let me ask you this question, Peter. When you talk about gold, there's gold that I can hold in my hand. There's physical pieces of bullion that I can hold in my hand. There's gold that someone else is physically holding for me in a bank vault. And then there's gold indexes and things like that.

If someone is interested in gold, how do you make sense of all those different things and what's a good way to go? Yeah, not a wrong solution amongst those three options. You laid them out very well. Those are three very legitimate and all available options to almost anyone. And all three have their time and place and appropriate, let's call it percentage of your total overall picture. But you've got to understand that each one has benefits and disadvantages, as does any financial choice or option.

There's always pros and cons and you've got to weigh them out. Holding the actual physical gold, fantastic. There's some security there. But what risk does that represent? I mean, if your purpose is to have some measurable store of value if the dollar does collapse and then it actually happens. You own gold and then everybody else, every dollar in every person's pocket is worthless.

The store shelves are empty and you're holding this pile of gold. How much of a liability does that represent versus the value that you intended it for when there's roving mobs running the streets? So having somebody else store some physical gold or having some paper gold in a gold fund or ETF in your portfolio.

You just have to weigh all of those and what their purpose is. Basically to me, gold is a form of insurance. When I buy a car, I have auto insurance. I don't have a $30,000 car and take $30,000 and put it in the bank and say, here's my store of value in case I get into an accident. I try to buy as little insurance as is going to be leveraged to protect the asset that I'm trying to protect. So in the grand scheme of your portfolio, if you've got a million dollar portfolio, you don't buy a million dollars in gold to protect and ensure the value of it.

You dedicate a percentage, a small portion, as little as possible to protect some amount of the value of that portfolio. That's the way that I think about gold, whether physical, whether in hand or whether in the portfolio. And it's actually the way that we're beginning to see cryptocurrencies being utilized, and that's a much more volatile, a whole different conversation. But cryptocurrencies represent the same kind of store of value and insurance against the devaluation of the currency as gold once did.

It is a totally different thing, new technology, and it's got its own risks associated with it. But more to the point of your original question, how do I know if I'm saving enough? Well, the point of most people's savings is not the store of value, actually. It's the ability to transact. And again, you know, gold is fantastic for the store of value, not very great at the transactional necessities that people have.

And so we really want to have a diversification of different types of assets. And the question of, am I saving enough? Usually that's delineated in dollars, first of all.

And the answer to that question is it's going to be different for every person, and it's going to boil down to your budget and your lifestyle, right? Somebody can come in with $300,000 and then the next person can come in with $3 million. There is no saying whom between those two is more prepared for retirement. Because if you've got $3 million but you're spending $500,000 a year on your lifestyle, you're taking wild multiple vacations each year, you and your wife head to separate destinations every time you take trips, you're spending $20,000 a month just on regular lifestyle expenses. That does not represent an amount that gives me or should give you confidence that you're prepared for retirement. And I've had a day where I've met with both of these individuals.

I'm kind of talking about it in a hypothetical sense. But I've had a day where I met with somebody with $3 million and I met with somebody with $300,000. At the end of the day, the guy with the $300,000 was much better prepared for retirement. He lived frugally. He always lived well within his means, well below his income. His Social Security was going to replace everything that he needed to meet his living expenses. And basically the $300,000 that he had saved and accumulated was icing on the cake.

It actually wasn't even needed to produce income for him in retirement. And so how much do I need to be saving? Am I saving enough?

That's a big question on the minds of a lot of people that I talk to. But the answer is not in the lump sum that you have. It's actually let's boil this down to budget and what your lifestyle costs you. And so I have a lot of people look back at their lifestyle expenses. How much is going out of the bank account month in and month out and month after month on a regular basis for the last 6 months, 12 months, 2 years? Let's get an average of that running number. Let's see how much it fluctuates month to month. And that's the number that we probably need to be shooting to be able to replace given a stoppage in the paycheck, a transition to retirement, and all of the available sources of income being turned on. We want to be able to maintain that kind of income that generated the lifestyle that you're accustomed to and comfortable with. And more great stuff from Peter Rishon.

You can talk to him directly about all these issues by calling 919-300-5886. Peter, so the market goes up and the market goes down. That's kind of a fact of life and it's been kind of pounded into us. People like yourself kind of let us know that that's kind of the ebbs and flows. What about significant market corrections, the kind of thing that comes around once in a while?

How do we how do we deal with this type of thing? Yeah, well, by once in a while, over the last 100 years, it's actually been about every 6.25 years or so. We have seen 16 different bear markets in the last 100 years. And by bear market, the definition of a bear market is when the market index drops 20% or more. So 16 different times over the last 100 years, the market has dropped 20% or more. Now, a lot of people hear that they are supposed to chase higher returns and they want an investment portfolio that is going to beat the market.

Well, here's the thing about that. If your investment performance is outperforming the market in good times, that means you are taking a higher level of risk than the market itself. And during those bear market periods, you may stand to lose more than the market. So, again, a bear market by definition is a 20% loss or more. Now, on average, those 16 different downturns, those 16 different bear markets have been closer to a 40% loss. And in general, it's taken about a year and a half to get from the top to the bottom. Sometimes it seems like, oh, those bear markets, they happened so quickly.

A lot of times it's a slow bleed, though. It takes about a year and a half from the peak of the market down to the bottom of the bear market. Nobody knows where the bottom is down toward the bottom.

Everybody's panicking. How low will this go? How long will this drop? And a lot of people make the mistake of selling out towards the bottom and then they don't participate in the recovery. That recovery, by the way, on average takes about five more years. So about six and a half years to go from the top down to the bottom and then back up to the top if you stay in, if you just ride the market, if you kind of have the fortitude to go through that.

And here's the thing. If you have security in your paycheck that you can pay your bills and maintain your lifestyle, then you should just ride that out and hopefully you continue saving. So you actually take advantage of that downturn and of those lower prices at the bottom of the bear market. But people right now, they're on the precipice of retirement. They are maybe five to 10 years before retirement, right there at retirement or five to 10 years in retirement.

They're worried. I mean, we've seen actually 10 fantastic years in the market here really since 2009. But we've seen a whole lot of positive movement and a lot of people have prospered and done very well because of that. But what happens when the market turns round? Are you comfortable with the potential of losing 20, 30, 40, 50 percent of your portfolio value? What does that mean in actual real dollars that you would lose?

And that's one of the exercises that we go through with clients is we can look at how their funds have performed in the past. During past downturns where the market has lost 18 percent or 30 percent, how much did this fund actually lose that you own? Well, if it lost that kind of amount when the market went down by this much, then it's probably positioned to lose a similar amount proportionally to market downturns in the future. And we can quantify the amount of risk that somebody has and then we can talk about how much that represents as a dollar value of a loss. So if you've got a million dollar portfolio losing 10 percent, well, yeah, I can stomach a 10 percent loss. So you're telling me that you'd be OK with losing $100,000?

Like, what could you buy with $100,000? It kind of puts it in a new light. And those are some of the conversations that we're having as we're talking about and trying to figure out what the appropriate level of risk is with an individual investor. And everybody's got a little different level of appropriate risk because they're willing to accept a little more or less risk.

But it's unique. And, you know, the concern of the market correction, what's coming around the corner, I think that's pretty pervasive. And I think that it's probably for a reason, because we've seen these fantastic years without a true major market correction. I mean, there was COVID, but that was a health related issue, not an economic issue.

It turned into a little bit of an economic issue. But by the time it did, the market was back up and has been healthy despite the health related issue of COVID. We haven't seen a true market correction since 2007, 2008 and the very beginning of 2009. So we are a little bit overdue. Some of the fundamentals, PE ratios, valuations, they do point to the fact that, you know, we've got a healthy market, but we also may have an overvalued market. And so those are some of the things that we pay attention to, as well as sort of indications of what may be to come. And there is some reason to be worried about a market correction. Doesn't mean you need to pull all out, though. Right. Well, that's the emphasis point that you've made and to not participate in the kind of scare marketing that we were talking about before. We don't know when the next market correction is going to come. That being said, it's been 10 years and the average is six and a half years.

Yeah. I'm actually more worried about some of the things that we do know are coming, Scott. The Fed has said that their weapon against inflation to create a soft landing is raising interest rates. Interest rates have been very low for quite some time. They have said they are going to raise interest rates throughout 2022. Well, if interest rates start to rise, the housing market is going to start slowing down. The people who have been able to refinance, who are able to, have done so already.

And they won't do it again if rates increase. Those that could moved into larger homes that they could afford at the same price because interest rates have been so low. But if interest rates rise, which the Fed has said is going to happen, the housing market starts slowing down and there's a lot of ancillary pieces of the economy. And then the stock market and bond market as well are all tied pretty directly to the housing market.

And so that could be something that I'm a little bit more worried about that's actually tangible. Not this, well, what if the market goes down? It's more, well, what happens when the interest rates start to go up?

Bond values fall, the stock market, many things are linked to the housing market. There's just a concern there for my clients. But, you know, all of these things are things that we talk about and work through and they are concerns that while they may be on your mind, if you've got a solid plan in place, if you've got that optimized retirement plan, you won't have to be consumed by them day after day after day. You can know that you've got a plan, that you've addressed this in your planning, and you can live life with confidence. And that's really, I think, one of the most rewarding parts of my job is that I can help people turn those worries and those concerns from an all-consuming thing into something that they are more confident that they've got a plan and that they are prepared to face.

Yeah, what's that worth? To know that, hey, the market's going up, am I missing out on something? Or, hey, the market's going down, am I going to suffer?

Having the right plan in place means that you're in the position correctly no matter which way the market goes. And that's, you know, peace of mind. In the end, we're talking about worry here. The opposite of that would be peace of mind or confidence.

And what's that worth, both in a monetary standpoint in this case and in a mental health standpoint? Peter Rashad, you've enlightened us once again. It's great information that you're giving us. If you do want to talk to Peter about the optimized retirement plan or any of the issues we're talking about here, up to and including the zombie apocalypse as he mentioned earlier today, you can call him, 919-300-5886, and you can talk directly to Peter just as I am here today. You can also visit his website.

It's www.richonplanning.com, www.rashadplanning.com. Peter, what else have you got for us as we wrap up the show here? Any parting shots? Well, I think a lot of people, at the root of it all, their concerns are, am I going to be okay?

Is my family going to be okay? And money represents a large part of our feeling of confidence in answering those questions. So let's get that part of it squared away. There may be some additional factors there, some legal planning that needs to be done, and we can help you identify where that is needed or where it may need to be updated.

And then we can live life with confidence. Scott, you mentioned an important factor. You will speak directly with me, folks. I know that there are plenty other resources out there, big names on the radio that give great information, but that you'd never talk to personally.

That's not the case here. We're going to talk face to face. Shake hands, look eye to eye. We can do it in person. We can do it virtually. I know with COVID resurging here and that being a factor again for a long time, we did virtual meetings only. We are always able to conduct those meetings virtually.

We are on a limited and safe basis conducting in-person meetings as well. So however you would prefer to do that. But I will be the person that you're talking to about your money and about your planning. We'll run through that optimized retirement plan. You can get a copy of my book, Understanding Your Investment Options, and we can lay out a plan that you understand and that makes sense to you and that you can feel confident in. Peter, we can't thank you enough for all this great information and Sage Wisdom. 919-300-5886 is the number to talk to Peter.

Thanks so much, Peter, for joining us and thank you for listening for another episode of 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, a registered investment advisor. Fiduciary 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.