Too often we want absolutes. We want simplification. And in finance, I have found that blending strategically based on time and need really helps. Welcome to the Retire On Time q and a podcast. I'm Michael Decker with David Franson.

This show is all about getting into the nitty gritty, not the oversimplified advice you've heard hundreds of times. As always, text your questions to (913) 363-1234, and we'll feature them on the show. Just remember, this is a show. This isn't financial advice, so take it with a grain of salt. Keep keep doing your research.

And if you want one on one help, go to retireontime.com and click the button that says talk to a planner. Alright, David. What do we got today?

Hey, Mike. Warren Buffett said he would hold stocks even if it were even if it were World War three, would you?

No. And yes. Yeah. And maybe. And so the the idea here is should you and I saw the interview, and it was a very interesting question.

But the the whole premise is, is the stock market a good place in case we go to war? And the reality is, I mean, it could be, it may not be. We don't wanna get in the business of predicting markets. So it's kind of the wrong question. It was a great question for Warren Buffett.

Mhmm. It was a great question, and he answered truthfully. He also doesn't need most of his money. Mhmm. Most of it's going to charity.

And so as an investor, you have to kind of understand, okay, for the long term haul, stocks can be a very effective tool to grow wealth, to hedge against inflation, and and have flexibility and and move things around, whether you're picking stocks or you're buying a bunch of ETFs. Is that fair, Sohr?

Yeah. So yeah. You you you okay. Yeah. I think so.

So that that's what is the purpose of a stock? The stock is a tool. That's it. You're buying a share of a business, and you expect that business to grow.

Yeah. That's the reason that you you bought it. Right? Because I expect it over the long term it will grow.

And the price only matters the day you buy and the day you sell, and if the day you sell is higher than the day you bought it, you worked out okay. Yeah. That's the general idea. Okay? So we don't wanna get in the business, especially in retirement planning, of trying to time the markets.

People don't do that well. And you know what's funny about timing the markets? Is your life doesn't time convenience. Mhmm. So when your car breaks down, when you need a new roof, your roof isn't saying, hey, so and so.

Is now a good time for me to break down? Yeah. Are the markets up so I can, you know, get this repaired? Like, that doesn't care.

No.

Do you think I mean, we're here in this great state of Kansas, right, close to Missouri, so we'll include our Missouri friends as well. Mhmm. Do you think a tornado is saying, hey, guys. Do you mind if I come through? Are the markets up?

Can you afford the repairs that I'm gonna incur? Know, force them? No, it's not.

They don't check-in with us.

So the idea that we can control the markets or the weather or our health and so on, I mean, even healthy people get sick.

Yeah.

So the simplest explanation that I have found for this is first off, put a plan together. Plan is just your basic projections on what you expect moving forward, and don't use too high of numbers. In our planning calculator that we offer to everyone, we don't let them go past 7% because that's ridiculous. That you think you're gonna get on average 7% every single year. That may have been something that's happened over the last ten to fifteen years, but the markets cycle, they don't trend, and we could enter into a flat market as a no returns for ten plus years in the near future.

And the people that over assume, over project, will be hurting pretty bad. Yeah. And I I don't think we could be more aggressive about that statement. So your plan is just your projections moving forward. The second part is the strategies.

And here's the most basic, fundamental way to look at your retirement strategy. Because income is kind of the first question people like to ask. I think income is one of the last ones you should answer, but that's on another conversation for another time. And that is if the markets are up, you can take income from anywhere. Easy strategy.

But when the markets are down, you need to take income from a protected source. There's three ways you can do that in our in our opinion at least. There's one as we call it the baseline reserves. K? And that's just maybe part of your income was from a lifetime income stream, from an annuity, from pension, from Social Security.

And as markets are down, that can sustain you. That's your baseline for expenses and so on. And maybe you went down that path. Maybe that was right for you. You're not accentuating losses if you're getting income from lifetime income streams.

Yeah. The other one is laddered income. So maybe a part of your portfolio is in a laddered out CD approach. So if it's World War three and, you know, it's Armageddon or whatever, okay. Well, you're getting laddered fixed income from CDs, treasuries, MYGAs, multiyear guaranteed annuities, or whatever it is.

Maybe you've got a more of a dynamic MYGA approach, whatever you you know, you and this is kind of a funny thing that I've seen. It's it's a cool idea, but maybe three years, you're pulling income from fixed accounts. And then in year four, five, six, seven, or so on, you've got indexed accounts, so like buffered ETFs or fixed indexed annuities. You can structure out some laddered approaches to where you've got short term, mid term, long term income sources. Okay.

K? But your long term incorn sources would still have stocks in them, probably, because you wanna hedge against inflation. Mhmm. I mean, markets have always recovered at some point. You just have to have enough time for them to recover.

And then the last one is that you you might have the dynamic reserves. So you just have three to five years of at least protected resources, protected accounts that you can tap into if the markets were to go down. So it goes back to the question, if markets are up, you could take income from anywhere, but if markets are down, you have a source that you know you can pull income from and not accentuate losses.

Okay, yeah.

That's really it. And if you have that, then there's a good chance that a part of your portfolio is going to be in the equities market or the stock market that you don't need to touch. If you had to, you don't need to touch it for ten, fifteen years. That's a good position to be in, then you can sift through what the worst could be. Yeah.

Do you see the difference there?

Yeah, absolutely. I mean, so

So stocks are a great thing to have. Yeah. But you don't wanna say, I'm a stock person, so I'm all stocks. Or I'm not a stock person, so I have no stocks. Yeah.

Why? Why do we wanna be so absolutist?

There's so many different tools that you can that are at your disposal. Why why not use them all? Like, we we don't wanna be limited to just a screwdriver if we have, like, an option of, a ratchet or a power drill or something. Right? So you don't have to twist your hand so much.

Oh, I'm gonna get the screw in.

Yeah. Do you want one tool to build a house, or do you want, like, all the tools to build a house?

All the tools to make

life one ingredient to bake bread or bake cookies, or do you want all the ingredients to make it taste good? Yeah. Like, you've got to use tools as they're supposed to be used. So don't expect stocks to give you protection, but expect them to have good long term growth. Don't expect CDs to outperform stocks long term, but expect CDs to have more protection than the stocks.

Yeah. You know, the CD is only as good as the bank that backs it up. Right? There's FDIC insured for bank products and all that. But it's too often we want absolutes.

We want simplification. And in finance, I have found that blending strategically based on time and need really helps. Really helps.

Mhmm.

So don't try to tie the market. And even in our models, we might have a more conservative portfolio. And notice, more conservative. It's not all conservative. It's not all bonds.

It's just we will adjust our portfolio based on the indicators of the times. But when times are good, we might be more risk on, you know, more risk off, more risk on. Yeah. It's okay to adjust your portfolio, but avoid the absolutes.

Yeah. Yeah. Yeah.

That's my opinion.

Yeah. So whoever asked Warren Buffett this question, they trying to get out of him? Like, oh, yeah. I would pull my money out of the market.

Well, know what's funny about Warren Buffett saying I'd be in stocks, he's got tons of money in cash and treasuries right now, so he wouldn't be all in stocks all the time. Yeah. He he buys stocks at a good value. Yeah. Well, how much is he in cash right now?

Don't know.

Yeah. And these are this is the problem of clickbait, you know, how much is Warren Buffett in cash or cash equivalents right now? This is according to a Google search with the Google search AI overview. Alright. Is that

That's gotta be a Gemini.

Is that Gemini? It's got the little Gemini symbols. So Alright. So he holds approximately 373,000,000,000 in cash and cash equivalents, including short term US treasury bills. He calls it the war chest, which represents roughly 31% of the conglomerate's total assets according to this AI search that we just did, which is not gonna be perfect, but it's roughly what it so he's not all in stocks.

Let's not take a quote out of context. I'd be all in stock if it was World War three. Yeah. No. He's got 31 or so percent in cash and cash equivalents to buy the dip.

Yeah. So even he's doing what we're talking about.

Yeah. Yeah.

Yeah. It's a different approach. He's trying to grow the war chest. He's trying to grow the portfolio. And if you read the intelligent investor Benjamin Graham, which was his predecessor, his mentor, you gotta understand, you buy things at a discount, and you sell things when they're overvalued, which is what he's done.

Yeah. So be be careful about sound bites and the one liners that are nice zingers. Yeah. That might not be the full story.

Agreed. You heard it here first.

Yeah. That's all the time we've got for this question. If you enjoyed the question, don't forget to like, subscribe on our on the podcast, wherever you get your podcast, and or on YouTube. YouTube's the best experience is you get to see us live, and we'll share our screen and so on. As always, go to retireon.com to buy the book, the workbook, and all the other resources.

Plus, you can attend live workshops where I actually build plans live from scratch and answer your questions along the way. All that's available on retireontime.com. If you want help putting your plan together, you can always go to retireontime.com as well and click the button that says talk to a planner, where you can talk to me or one of my my associates here who can help you put your retirement plan together. As always, thank you for spending your time, your most precious asset with us today. We'll see you in the next show.