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Welcome to How to Retire on Time, a show that answers your retirement questions. Say goodbye to the oversimplified advice you've heard hundreds of times. This show is about getting into the nitty-gritty so you can make better decisions as you prepare for retirement. Text your questions to 913-363-1234 and we'll feature them on the show. Don't forget to grab a copy of the book, How to Retire on Time, or check out our resources by going to www.retireontime.com.
Hello, and welcome to How to Retire on Time, a show that answers your questions about all things retirement, including income, taxes, Social Security, health care, and more. This show is an extension of the book, How to Retire on Time, which you can grab today on Amazon dotcom or by going to www.how to retire on time.com. My name is Mike Decker. I'm the author of the book, How to Retire on Time, but I'm also a licensed financial adviser, insurance agent, and tax professional. Which means, when it comes to financial topics, we can pretty much discuss it all, whatever's on your mind.
Mike:Now with that said, please remember this is just a show. Everything you hear should be considered informational, as in not specific advice. This is not financial advice. If you want personal financial advice, then request Your Wealth Analysis from my team today by going to www.yourwealthanalysis.com. With me in the studio today is my esteemed colleague, mister David Fransen.
Mike:David, thanks for joining us today.
David:Hello. Thank you.
Mike:Now for all those listening, David's gonna be reading your questions. That's right. Your questions. And I'm gonna do my best to answer them. You can send your questions in by either texting them to 913-363-1234.
Mike:That number again, 913-363-1234, or email them to hey mike at how to retire on time.com. Let's begin.
David:Hey, Mike. I'm concerned the market will crash soon. What do you recommend people do before a market crash?
Mike:Nothing. I'm not. Yeah. Okay. So let me preface what I mean by nothing.
Mike:If you're trying to time the market, you have the wrong portfolio, you have the wrong plan. There's no other way to say it. If you're thinking, you know, gosh, the market's gonna crash, so I'm gonna go all into CDs, all in the money market, all in the cash. You're trying to time the market. One of my most memorable moments in the last 10 years I've been doing this was having lunch in New York City with a bunch of the top hedge fund managers in New York.
Mike:Most brilliant people I've ever met. And you know what they joked about?
David:Tell us.
Mike:How even the top hedge fund managers were trying to time the market because they got nervous. And this was with with their personal assets, not with their portfolios. Right? Sure. It was their own personal accounts.
Mike:But one of them in particular was joking about how his friend went to cash or near cash in, 1997 and missed out on incredible growth in 1998 and 1999. And, yeah, the market crashed in 2000, but he sat in cash for 5, 60 years. Hard to keep up with inflation, hard to do anything if you're sitting in cash for that long. Yeah. And CDs can only do so much.
Mike:So think of your portfolio just for a second as multiple portfolios. As in, you've got one part of your portfolio that is intended for long term growth, and then another part has principal protection. Let me explain what I mean here. There are 3 things we want with all investments. We want growth, we want protection, and we want liquidity.
Mike:Can't have it all. You can pick 2. So if you take a part of your portfolio and you've got growth with liquidity, you're talking stocks, mutual funds, right? You can sell them. They're relatively liquid.
Mike:And you're able to sell them and grow them over the long term, but they have risk. You're taking more risk for more potential reward. Doesn't mean you're gonna get a nice reward over the next couple of months. It could go down over the couple of months. But you don't need to touch the assets for a long term period of time.
Mike:If markets are up and you wanna touch it, no problem. But if markets are down, you don't have to touch it. That's the important part. And then you've got another part of your portfolio that is focused on growth and principal protection. That's where your CDs, treasuries come in, your high yield savings or money market for shorter term needs.
Mike:That's where your fixed annuities come in if you're over the age of 59a half, and you basically want a CD from an insurance company. In other words, you want a CD like product that has a longer duration than the CDs are offering today because insurance companies and banks just operate differently. But it's a fixed rate for a certain period of time, if that's what you want. Fixed indexed annuities, as long as you don't sign up for the riders and the fees and all this, using it as a cash accumulation play with protection. I personally believe that they have more growth potential than CDs or treasuries over the long term period of time if you shop for them well.
Mike:Remember, you can get a CD at 5% or 0.5%.
David:Uh-huh.
Mike:You can buy a fixed index annuity and get basically nothing, or you can get one that has more growth potential. The due diligence matters. And then if you already have cash value life insurance that may be incorporated here. But when you put a part of your portfolio in assets that have growth potential and protection, and the markets go down, you know where you're gonna draw your income from. You know you're gonna draw it from principal protected accounts, so that you don't accentuate losses, you can ride out the market crashes, and be fine.
Mike:Everyone alive today that's the age of 50 to 60 years old, just by simple math, had to experience the 2022 crash, the 2020 crash, the flash crash of 2015, the, 2008 financial crisis.
David:I mean, what did you do
Mike:in the 2008 financial crisis? Assets were in your 401 k? Did you sell? Hopefully not. Hopefully, you just rode it through.
Mike:Eventually, it came back, and it was a booming economy after that. The tech bubble. 2000, 2001, 2002, around 50% down in the market. What'd you do? Probably just held on to it and let it grow eventually.
Mike:Let's see, 1990 when Iraq invaded Kuwait, there was a market crash in there. What'd you do then? 1987, black money, what did you do then? You don't change the style of your timing of the market just because you're retired. You just need to section off parts of your portfolio based on how long you want to hold them.
Mike:If you put, let's say, 20% of your assets into certain investments that you don't need to touch for 10 years, would you be as concerned about the next market crash? Probably not. No. The problem is we're taking absolute portfolios, not absolute return portfolios. Just we're taking a portfolio and saying it all needs to be kind of in the same thing and trying to time the market by all in the market or all in cash or all in CDs.
Mike:No. That's the wrong thing to do. You wanna be deliberate about what's going where and why. And the only way to do that, the only way I know how to do this and this is my my expression, plan efficient growth portfolios. You first put together your lifestyle and legacy plans so you know what you're working with, you know what your needs are from a time frame standpoint, from a lifestyle expectation standpoint.
Mike:Then you look for efficiencies, tax efficiencies, social security optimization. Go down the list. You're looking for the strategies you wanna implement. Once you understand the strategies that you wanna implement, then you can start saying, okay. Do these strategies also foster growth?
Mike:Why growth? Think about what life was like 20 years ago. We didn't have the iPhone. I mean, Google Maps, are you kidding me? Nope.
Mike:The the medical advancements that we've had, life is fundamentally different today than it was 20 years ago. What's life gonna be like in 20 years from now? It's just accelerating.
David:Right.
Mike:And with the AI component that's in there, that's gonna, hopefully help health care and and other industries just propel forward even more. I personally believe, again, it's my opinion, that locking up your assets to a flat income stream is a very dangerous thing. I personally believe that retirees should have protection and long term risk and blend them together so that in 10 years 20 years, they've been focused on growth and they have more flexibility, more assets. They're more prepared for inflation, for tax changes, and for fundamental lifestyle advancements that are happening. Who knew 20 years ago that you'd wanna spend $1,000 on a phone?
Mike:That's possible. Yeah. That's a cost we have today. Right?
David:Right. People just do it now without thinking about it.
Mike:A lot of people have their cable subscriptions and Netflix and Hulu and HBO. I mean, lifestyle will be fundamentally different, in my opinion, in 10 years from now. It's just accelerating. So how could you possibly know what your cash flow needs to be in that point? You need to be, in my opinion, flexible for the future, which is why I believe everything in your portfolio should be focused on growth.
Mike:But there's the asterisk there. Some growth with risk, which means there's more growth potential, but you've got risk, but you don't need to touch it for the long term. And some growth with protection, so when the markets go down, you can draw income from a principal guaranteed source and not accentuate your losses, so you can sail through the market crashes. So that, and this is the big takeaway here, that you're not trying to time the market. You've accepted the fact that the markets tend to crash every 7 or 8 years.
Mike:You've accepted the fact that the markets tend to correct 10% from top to bottom every 1.8 years or so. It seems to be more increasingly frequent as of late. You've accepted the fact that markets can go flat for 10 plus years every 20 years or so. And in spite of all of that, you don't lose sleep because you've built a portfolio that supports growth, that also implements strategies that look for efficiencies, so you get more out of your hard earned money. All focused and built around supporting your lifestyle and legacy plan.
Mike:And the fact of the matter is, I do not see this kind of planning often. And it saddens me. You don't just sell a product. You can't do this and just sell a stock bond fund portfolio. You can't do this and just sell an annuity income stream.
Mike:You can't do this even just sell a DST. You've got to build a comprehensive portfolio that's guided by all of these other aspects. If not, you may have oversimplified advice, you may have oversimplified plan, and there's a price that you may pay for that. The financial planning work that, at least, we do here at Kedrick, can make a significant difference overall in someone's quality of life, not now, not next year, and not in a few years. I joke with my clients.
Mike:I say, yeah, we're investing in the market. Don't you think the market's gonna crash? Yeah. I think it's gonna crash sometime soon. But I don't know when.
Mike:It may be this year. It may be in 2 years. It may be in 4 years. No one knows. And it would be irresponsible, in my opinion, to try and time the market when the research is clear.
Mike:No one can time the market, defining as you're all in the market, and then you go to cash, and then you're all in the market, and then you go to cash. Can't be done. Anyone that thinks that it can be done may be suffering from ignorance. Just my opinion. If you want more information about a wealth analysis or how we do our planning, you wanna see what that looks like, just go to www.yourwealthanalysis.com today.
Mike:You'll learn more about what we do. It doesn't cost you a dime, but it's a 30 minute call with me and my team. Then you get 2 60 minute sessions putting together a preliminary plan and exploring the efficiencies that you could be implementing with your plan. We're stress testing it. This analysis tends to offer more information than your typical financial plan or retirement plan, and you get it at no cost.
Mike:Text right now analysis to 913-363-1234, or go to your wealth analysis dot com for more information on how to get started and to request it today. Doesn't cost you a dime, but, man, it really could significantly improve your overall quality of life as you prepare for retirement. Or if you're already retired, also could help you there. That's all the time we've got for the show today. If you enjoyed the show, consider subscribing to it wherever you get your podcast.
Mike:Just search for how to retire on time. Discover if your portfolio is built to weather flat market cycles or if you're missing tax minimization opportunities that you may not even know exist. Explore strategies that may be able to help you lower your overall risk while potentially increasing your overall growth and lifestyle flexibility. This is not your ordinary financial analysis.
David:Learn more about Your Wealth Analysis and what
Mike:it could do for you regardless of your age, asset, or target retirement date, go to www.yourwealthanalysis.com today to learn more and get started.